History will judge 2014 as the year when Infosys finally shed the legacy weight of its founders. After a couple of tumultuous years where Infosys even brought back NR Murthy back from his retirement to save the company, the change finally arrived at the top seat in the form of Vishal Sikka. June 2014 wasn’t only the first year when Infosys got a CEO who isn't an Infosys founder in its 33-year old history, it also marked a tectonic shift in the way company functioned. And it showed in its third quarter and the first results that the company announced under the leadership of Sikka.
Sarabjit Kour Nangra, VP Research - IT, Angel Broking, said that the results were better than expected. Dalal street, too, echoed similar sentiments and the stock price closing the day with nearly 5% gains is a testament to that.
The year gone by
NR Murthy who came out of the slumber in 2013 to resuscitate the losing Infosys finally decided to pass the mantle to Vishal Sikka of SAP. He stepped down in June. CEO SD Shibulal resigned from his post and from his board seat on July 31 paving way for Sikka to take over controls at Infosys. This was followed by the resignation of executive vice-chairman Kris Gopalakrishnan.
These three changes brought in, for the first time in its 33-year history, no Infosys founder was part of the management of the company. An IT analyst tracking the sector told Quartz, “This entire succession plan has been badly handled at Infosys. The management, time and again, spoke about the leadership pipeline, grooming people to take over the top job, large bench, etc but when it came to finding the next leader they threw all those internal candidates out of the window and hired an outside guy (Sikka).”
The million dollar question: What is the plan?
With its stock price rallying this year, the market seems to be liking the noises made by the new CEO. Since June, Sikka has constantly spoken about reinventing the wheel and taking this behemoth of a company forward. Focusing on the core business that includes BPO and testing, Sikka is aiming to increase the efficiency of delivery by focusing on his new mantra of Automation and Artificial Intelligence, Madhu Babu of HDFC Securities wrote in a report dated December 5.
The company is also boosting its sales team and has aggressively hired over 200 new employees to spearhead the sales and marketing of its new products and strategies.
The transformation
Sikka made it amply clear that the transformation of Infosys is about people and processes and said that the lost glory of this $8 billion enterprise shall be restored. However, the build-up to the transformation wasn’t easy. He wrote, “Companies, after all, are us. No more, and no less, than us, the people within them. So, transformation of a company, is really about transformation of the people within, and around it, transformation of the contexts we form, the processes we have, and of the things we do."
Bringing back the lost glory
In its first analyst meet since Sikka took over reigns of the company from Murthy and Shibulal in June this year, the signals sent were clear – the core business stays but the effort to scale up new businesses with potential to earn high revenues will be chased with equal gusto.
Sikka is keen to put Infosys back on the map as the bellwether of the Indian IT sector or perhaps India Inc. He is hopeful that investing in next-gen technologies like artificial intelligence, design thinking, automation, et al, is going to be at the core of the new strategy at Infosys. Sikka believes that regaining its position in its core business is also based on these new investments.
With his first results at the helm of Infosys, Sikka seems to be on the right track. A 13% growth in its consolidated net profit has beaten the estimates that analysts were making. An analyst who wished not to be named citing his company policy, said, “It is too early to pass a verdict on Sikka but till now he has made all the right noises. He sounds bullish than the earlier management and he seems aggressive on acquisition-led growth as well. We will have to wait and watch to see if the current board allows him to do that or the ideology of the previous management is difficult to get pass by.”
Existing problems
The quarterly annualised attrition rates of 26%, Infosys continues to be a constant worry for Sikka. Infosys, on January 9, said that the company added over 13,000 new employees in the quarter gone by, coupled by a 100% bonus to the employees and 3,000 new iPhone 6s to the best performers, are other initiatives Sikka took to stem the high attrition rates.
Manik Taneja and Ruchi Burde of Emkay Research said, “Infosys’s recent steps in restoring regular wage hike cycle, better variable pay-outs as well as increased promotions should temper attrition over the next few quarters in our view.” The major challenge for Sikka is to bring Infosys back on the growth road and meet the 6% industry-wide average growth rate for Infosys as set by NRN Murthy by 2016.
The Sikka strategy
2014 is, hence, start of a new era for Infosys never seen before in its history. The push towards everything ‘digital’ is Sikka’s strategy. He said, "“Based on our strong performance, we are intensifying our efforts to deepen employee engagement, client ecosystem and strengthen our foundation of education as we build a next generation services company that innovates for consistent profitable growth.”
Surendra Goyal and Rishi V Iyer of Citibank, in a report dated December 4, 2014 outlined initial steps of transformation for the company. They said that the hiring in big data and analytics was up 59% over the past two quarters with over 16,000 employees in the digital practice of Infosys. They further said, “Service innovation council, comprising of delivery leadership, has been set up to spearhead service innovation (3) Training – 1,000 employees trained on machine learning with plans to train 500 every quarter, trained 8,238 employees on design thinking.”
Actions Sikka took to achieve his goals
With his entire focus on automation, artificial intelligence, digital, design thinking, big data and analystics, Sikka made two important appointments since August. He brought in Navin Budhiraja and Michael Reh, two of his colleagues at SAP to focus on new platforms and businesses. Not only this, the Mysore training centre of Infosys will be used to re-train its employees in the new direction that Sikka is taking for Infosys.
Our “renew and new” strategy, is being received well by our clients and our ecosystem and we are already seeing its early adoption”, Vishal Sikka said.
What remains to be seen is that whether Infosys, under Sikka, will be able to continue on this promising start and regain its status as the bellwether of the Indian IT sector soon enough.
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